Soaring oil prices, driven by upheaval in the Middle East, falling equities and elevated volatility have all made investors uneasy.
A flight to the dollar usually accompanies increased risk aversion. This time, though, while the traditional havens of the Swiss franc and the yen have benefited, the US currency has suffered.
“It seems the dollar’s haven status has vanished,” says Steve Barrow at Standard Bank. “And, even for long-term dollar bears like ourselves, this is a worry.”
The main reason for the dollar’s underperformance, say analysts, is concern about the effect of rising oil prices.
The fear is that higher oil prices will lead to a transfer of funds from oil-importing countries to the sovereign wealth funds of oil-exporting nations.
Mansoor Mohi-uddin, global head of FX strategy at UBS, says such funds tend to keep a low proportion of their assets in US markets compared with traditional central bank reserve managers.
“Thus the greenback is also being undermined by fears that higher oil prices will lead to increased sovereign wealth fund dollar diversification activity,” he says.